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Research from global benefits consulting firm Towers Watson suggests Freedom 68 could be a realistic goal for older workers currently contemplating retirement.
Freedom 55 Financial (a division of London Life) still exists, but early retirement is no longer a viable scenario for most Canadians. Realizing this, in September London Life launched a marketing campaign to change consumers’ perception of the iconic Freedom 55 brand to align more with “whatever freedom means to them.”
But many boomers who have nurtured dreams of checking out early and relocating to a southern beach don’t have any idea when or if they will ever be able to afford their dream.
However, a new Towers Watson study pegs age 68 as a reasonable retirement date for boomers planning an exit strategy.
The company’s latest Defined Contribution Retirement Index reveals that a member of a defined contribution pension plan (or RRSP) who wants to retire today, will have to save 8.5 years longer than an individual who was able to retire in 2007 at age 60 after saving for 20 years.
This assumes that the person who retired December 31, 2007 realized an annualized investment return of 7.2 per cent for 20 years as compared to a plan member who retired September 30, 2012 with an average return over 20 years of 6.3 per cent.
“These results really illustrate how changes in investment returns and annuity prices can impact the funds available at retirement,” says Towers Watson consultant Michele Loder. While a 0.9 per cent difference in returns does not sound like much, Loder says it can translate into tens of thousands of dollars that will not be available to the 2012 retiree for an annuity purchase.
“That means an individual currently contemplating retirement will have to work longer to make up the difference, contribute more during the delay or be satisfied with less income than his counterpart who retired in 2007.”
Findings from Towers Watson’s Retirement Attitudes Survey also show that better employer retirement education and planning tools could help employees set and manage more reasonable retirement expectations. Less than 40 per cent of employees surveyed think their employers are doing a good job of providing retirement tools and the number decreases to 30 per cent for employees over 50 nearing retirement.
“Unless employers provide retirement education and necessary tools, they run the risk of having ‘hidden pensioners’ who may be less productive because they are working out of necessity rather than by choice,” says Towers Watson plan senior pension actuary John McIntosh.
Related: Boomers clogging the career pipeline